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What do the top hedge fund and mutual fund gurus like in the insurance industry? This article, the fifteenth in a series, identifies through a research of the latest available institutional 13-F filings the gurus that are most invested in the Insurance industry, and the specific Insurance stocks they prefer to hold in their portfolios. The first 12 articles in the series identified Gurus that are over-weight in the Solar sector, Utilities sector, China stocks, Airline sector, Optical Networking sector, Chemicals industry, Oil and Gas Exploration Industry, the Automobile Industry, the Biotech Industry, the Consumer Non-Durable Goods Sector, the Gold and Silver Mining Industry, and the Regional Banking Industry, and the stocks within those sectors that they hold in their portfolios. Definitions of "guru" and other jargon can be found there as well.
The total capitalization of the US equity markets is somewhere in the $15 trillion range, and the total market capitalization of leading Insurance companies is $800 billion, which is approximately 5.3% of the overall market. The table lists five investment gurus whose funds have invested more than one-and-a-half times that average or at least 8% in the Insurance industry. The following is a list of their picks in that sector:
  • Diversified insurance companies such as American International Group (AIG) offering group and individual life insurance, annuities, and general property and casualty insurance worldwide; and Hartford Financial Services Group (HIG) offering individual and group life, group disability and property and casualty insurance products primarily in the U.S.
  • Accident and health insurance company Unum Group (UNM), offering group and individual disability insurance and group life insurance, mainly in the U.S. and U.K.
  • Property casualty and title insurance companies such as Travelers Companies Inc. (TRV) offering commercial and personal property and casualty insurance to businesses, government units and individuals; Assured Guaranty Ltd (AGO) offering financial guaranty insurance and reinsurance through the structured and public finance lines of business; Aspen Insurance Holdings (AHL) offering property and casualty reinsurance and insurance products sold on a worldwide basis; Transatlantic Holdings (TRH) offering property and casualty reinsurance on a treaty and facultative basis to insurance and reinsurance companies; Markel Corp. (MKL) offering specialty insurance products and programs like hard-to-place risks and loss exposures for niche markets; Enstar Group Ltd (ESGR) that acquires and manages insurance and reinsurance in run-off covering activities such as claims administration; Montpelier Re Holdings (MRH) offering global property and casualty insurance and reinsurance products such as property catastrophe reinsurance; Everest Re Group Ltd (RE) offering property and casualty reinsurance and insurance products in the U.S., Bermuda and other international markets; Platinum Underwriters (PTP) offering property and marine and casualty reinsurance coverage to insurance and reinsurance providers worldwide; Flagstone Reinsurance Holdings SA (FSR) offering property, property catastrophe and short-tail specialty reinsurance mainly in North America and Europe; and Employers Holdings Inc. (EIG) offering workers’ compensation insurance for small businesses in low to medium hazard industries primarily in CA and FL.
  • Life insurance company Kansas City Life Insurance Co (KCLI) offering traditional, interest-sensitive and variable life and annuity insurance products in 48 states and D.C.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Portfolio in the Insurance Industry
Major Insurance company positions in Portfolio
Invesco Private Capital, Inc. (Wilbur Ross)
Hedge Fund - Distressed Investing
$ 920 million
30.8%
AGO
Akre Capital Management, LLC (Chuck Akre)
Mutual Fund – Growth at a Reasonable Price
$ 477 million
20.0%
MKL, ESGR, HIG
Fairholme Capital Management LLC (Bruce Berkowitz)
Hedge Fund – Deep Value
$ 15.8 billion
16.6%
AIG
Donald Smith & Co., Inc. (Donald G. Smith)
Hedge Fund and Mutual Funds - Deep Value
$ 3.2 billion
8.5%
MRH, UNM, RE, PTP, FSR, KCLI
Greenlight Capital Inc. (David Einhorn)
Hedge Fund – Shareholder Activist
$ 5 billion
8.1%
TRV, AHL, RE, TRH, EIG
Wilbur Ross is the founder of hedge fund Invesco Private Capital. He specialized in leverage buyouts (LBOs) and is well known for investing in distressed companies and restructuring failed companies.
Chuck Akre, managing member and CEO of Akre Capital Management LLC, has been named to Barron’s “Top 100 Mutual Fund Managers” list from 2003-06, one of only two small-cap growth managers to make the list four consecutive years. He has been in the securities business since 1968, first as director and CEO of Asset Management Division and director of research at Johnston, Lemon & Co. until 1989, and later as the sole sub-advisor to the $1 billion FBR Focus Fund, from which he resigned in 2009. While he was managing the FBR Focus Fund, the fund performed in the top 1% of small/mid-cap growth funds in 2002, 2004, and 2006, as well as in the second percentile in 2001 and the sixth percentile in 2008. As of the latest filing, Akre Capital Management had $477 million holdings in equities and was relatively concentrated with less than 35 positions in the portfolio. His focus seems to be in the small- and mid-capitalization portion of the equities markets, and his investment style seems to be selecting equities based on a Growth at a Reasonable Price (GARP) approach.
Miami-based Hedge Fund and Mutual Fund manager Fairholme Capital Management LLC is a deep value investment manager, founded by chief investment officer and managing member Bruce Berkowitz in 1997. Fairholme Capital seeks long-term growth by investing in concentrated portfolio of equities. Fairholme’s preferred investment strategy is to silently partner with exceptional owner-managers who have demonstrated success, honesty, and integrity. The firm buys when it finds such companies generating or holding significant cash when compared to market values. Purchases are made without regard to categorization. The firm also invests in special situations, including, but not limited to, Chapter 11 reorganizations.
With total assets under management (AUM) of $3.2 billion, hedge fund Donald Smith & Co., Inc., headed by Donald G. Smith, was founded 30 years ago and invests in out-of-favor companies selling in the bottom decile of price-to-tangible book value ratios, and that have significant earnings potential over the next two to four years.
Hedge Fund Greenlight Capital, founded in 1996 by David Einhorn, manages a series of value-oriented alternative investment vehicles including hedge funds and reinsurer Greenlight Capital Re. He focuses on intrinsic value in making their investments, which is generally calculated by summing the future income generated by an asset and discounting it to the present value, and is thus different from the more commonly used market value and book value of the security. He is also a shareholder activist investor, meaning that the fund can take large stakes in target investments and then can use its influence resulting from the ownership to effect change at these companies, with the objective of eventually selling them for a tidy profit.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix by Edgar Online, Zacks Investment Research, DailyGraphs, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Top Insurance Picks by Fund Gurus Concentrated in the Sector